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Please note this article originally appeared in Carbon Pulse: https://carbon-pulse.com/193444/

15 March 2023 | We’ve come a long way since 1979, when leading scientists from around the world first formally warned that deforestation was a significant contributor to global climate change.

The interactions between human activities, terrestrial ecosystems, and the atmosphere are complex and dynamic, and it took a while before frameworks were in place to account the benefits of climate actions in the agriculture, forestry and other land use (AFOLU) sector. Some of the original guidance on project-based AFOLU activities was published by the IPCC in 2000.[1]

By 2010, the science had advanced enough to create financing mechanisms for “REDD,” which stands for “Reducing Emissions from Deforestation and forest Degradation.” Voluntary carbon market finance supporting REDD activities depends on effective forest conservation, and on appropriate and reliable tools for measuring and accounting the benefits of climate actions– called “carbon methodologies.”

Just as our understanding of climate science continues to advance, carbon methodologies likewise must not be static constructs, but rather must continue to evolve and improve in step with advancements in knowledge and technology. The development and refinement of carbon methodologies is a deliberate and ongoing process involving research, testing and critical evaluation, and draws on the contributions of researchers, practitioners, auditors and the standards that administer them. This process doesn’t involve replacing or invalidating established approaches, but instead building on and improving them over time.

Prior to the establishment of formal REDD methodologies, Sandra Brown, a leading pioneer in forest carbon science and mentor to many, led a team of researchers testing approaches to set REDD baselines in a wide range of landscapes. Their findings were published in 2007 in Mitigation and Adaptation Strategies for Global Change[2], and were later incorporated into some of the first REDD methodologies approved by the Verified Carbon Standard (VCS) in 2010.

While those first REDD methodologies reflected the best available science at the time, they did not represent an end point. Since then, the methodologies have been progressively refined as new science became available. As an example, an integral part of REDD baselines involves predicting deforestation risk at small scales (“risk mapping”). As predictive models continued to be improved, together with advancements in satellite sensors and classification techniques of land cover change, researchers at Clark University, led by Gil Pontius, published new findings and recommendations regarding how model goodness-of-fit should be evaluated[3]. These recommendations, and new metrics to evaluate model reliability, were subsequently incorporated into the methodologies as revisions, improving confidence in this aspect of baseline setting. The soon-to-be released consolidated REDD methodology developed under Verra’s VCS Program represents the latest step in this process to draw on the latest science to build on and strengthen methodologies.

This active interface with the latest science has led to important innovations making possible carbon accounting of new AFOLU activities. With The Nature Conservancy, TerraCarbon developed the first standardized method for baseline setting in the AFOLU sector in the VCS Reduced Impact Logging (VM0035[4]) methodology. The methodology, approved in 2015, was based on extensive research in East Kalimantan, Indonesia, led by Bronson Griscom and Peter Ellis, published in Global Change Biology in 2014[5]. Informed by new research initiatives, the geographic scope of the methodology has been expanded incrementally to include new forest landscapes, including the Yucatan peninsula of Mexico, Republic of Congo and Suriname (the last two in development).

More recently, TerraCarbon has led the introduction of new impact evaluation approaches to carbon methodologies, involving direct observations in matched controls to produce dynamic baselines. This work was preceded and informed by a research effort undertaken by TerraCarbon and colleagues from North Carolina State University, IMAZON and Duke University, piloting the application of the Synthetic Control Methodology (SCM) in Brazil, to evaluate the avoided deforestation impact of the Green Municipalities Program administered by the state of Para, and published by Erin Sills and her team in PloS ONE in 2015[6]. Dynamic approaches like SCM and nearest neighbor matching offer important improvements over baselines that rely on fixed historic assumptions. Because controls representing the baseline are observed ex post using dynamic approaches, and are subject to the same externalities like policy, markets and climate as the project, dynamic approaches have the potential to better resolve and attribute impacts back to the actions that produced them, the central aim of any carbon methodology. We have incorporated dynamic approaches in the American Carbon Registry’s Restoration of Pocosin Wetlands methodology[7] approved in 2017, in the VCS Methodology for Improved Forest Management (IFM) Using Dynamic Matched Baselines from National Forest Inventories (VM0045[8]), approved in 2022, and in the upcoming VCS Methodology for Afforestation, Reforestation and Revegetation (ARR) Projects.

Dynamic approaches like these deserve serious consideration more broadly in the AFOLU sector, and have the potential to make valuable contributions in accounting for REDD, that can build on or complement existing approaches. TerraCarbon maintains our commitment to support the work of Verra and other voluntary carbon standards in their continual effort to critically evaluate and improve carbon methodologies. New approaches, however, require testing to determine their appropriateness across varying circumstances, and to this end, TerraCarbon will be working with partners over the next year to pilot applications of dynamic baseline approaches in the context of REDD across a range of forest landscapes, evaluating the benefits they can offer. We plan to share the results publicly, and where they show promise we will solicit broader engagement on how they can be integrated into, and strengthen the integrity of, existing accounting frameworks, including emerging jurisdictional baselines.

Non-market approaches that rely on public and philanthropic funding have been insufficient to stem global deforestation and its contribution to climate change.  Market-based approaches, that are results-based and supported by sound accounting methods, are crucial to expanding and scaling finance from public and private sources to protect the world’s remaining forests. The ongoing need to evaluate and refine accounting methods, incorporating new data and new understanding, is not a fatal flaw in the market. Rather it is a natural and essential process that we will support so that market-based finance can be delivered more efficiently and urgently to fight climate change and conserve forests around the world.

[1] Brown, S., Masera, O., & Sathaye, J. 2000. Project based activities. In R. T. Watson, I. R. Noble, B. Bolin, N. H. Ravin-dranath, D. J. Verardo, and D. J. Dokken (Eds.), Land use, land-use change and forestry: A Special report of the IPCC(pp. 283 – 338). Cambridge: Cambridge University Press

[2] Brown, S. et al. 2007. Baselines for land-use change in the tropics: application to avoided deforestation projects. Mitigation and Adaptation Strategies for Global Change, 12, pp.1001-1026.

[3] Pontius Jr, R. G. (2018). Criteria to Confirm Models that Simulate Deforestation and Carbon Disturbance. Land, 7(3), 14.

R G Pontius Jr, et al. 2008. Comparing input, output, and validation maps for several models of land change. Annals of Regional Science, 42(1): 11-47.

R G Pontius Jr et al. 2007. Accuracy assessment for a simulation model of Amazonian deforestation. Annals of Association of American Geographers, 97(4): 677-695.)

[4] https://verra.org/methodologies/vm0035-methodology-for-improved-forest-management-through-reduced-impact-logging-v1-0/

[5] Griscom, B., Ellis, P. and Putz, F.E., 2014. Carbon emissions performance of commercial logging in East Kalimantan, Indonesia. Global Change Biology, 20(3), pp.923-937.

[6] Sills, E.O., Herrera, D., Kirkpatrick, A.J., Brandão Jr, A., Dickson, R., Hall, S., Pattanayak, S., Shoch, D., Vedoveto, M., Young, L. and Pfaff, A., 2015. Estimating the impacts of local policy innovation: the synthetic control method applied to tropical deforestation. PloS one, 10(7), p.e0132590.

[7] https://americancarbonregistry.org/carbon-accounting/standards-methodologies/greenhouse-gas-benefits-of-pocosin-restoration

[8] https://verra.org/methodologies/methodology-for-improved-forest-management/

30 January 2023 |Corporate interest in protecting biodiversity has accelerated considerably in the last five years, according to the latest Supply Change data.

Biodiversity is under serious threat from human activities like agriculture, pollution, and overexploitation. Because biodiversity underpins well-functioning ecosystems and provides essential services (“ecosystem services”) that human society relies on, such as crop pollination, rainfall patterns, soil fertility, and flood prevention, the loss of biodiversity is a serious threat to the global economy. Nonetheless, biodiversity has historically been a “silent crisis,” frequently overshadowed in political and corporate activities by comparatively serious threats like climate change.

However, the silent biodiversity crisis is starting to make some noise.

The United Nations’ Convention on Biological Diversity’s Fifteenth Conference of Parties’ (COP15) concluded on December 19 with governments striking a historic deal to protect thirty percent of Earth’s terrestrial and marine areas, restore thirty percent of degraded ecosystems, and reform environmentally harmful subsidies.

Companies, too, are increasingly acknowledging the role they play in driving biodiversity loss, and they are embarking on efforts to avoid, mitigate, minimize, and compensate for their negative impacts on biodiversity. Biodiversity loss and deforestation are closely linked issues; habitat loss is the most significant cause of species extinctions, and the conversion of tropical forests to produce forest-risk commodities, like cattle, palm oil, and soy, is the leading cause of terrestrial biodiversity loss globally. Addressing deforestation will be a crucial component of any larger biodiversity protection policy for companies that source and produce forest-risk commodities.

Over the past five years, Supply Change has observed an explosion in the number of companies aiming to protect biodiversity as part of their commitment to reduce or eliminate deforestation in their forest-risk commodity supply chains.[1] Data gathered in late 2021, featured in part one of Supply Change’s two-part report series published in 2022, show that over three-quarters (76 percent) of companies researched included a biodiversity protection statement in at least one commitment. 

This is a considerable jump from just five years ago. Supply Change data show that in 2018, only about half of these companies had biodiversity statements, and Supply Change’s 2017 annual report stated that only 37 percent of companies researched had a biodiversity statement.

Companies’ statements on protecting biodiversity are often general, but they occasionally provide specifics about the aspects of biodiversity they are most concerned with protecting and how they are implementing (or planning to implement) these protections, beyond preventing habitat destruction by tackling commodity-driven deforestation.

For example, out of 94 companies aspiring to protect biodiversity, about a third pledged to protect endangered species, and 18 percent pledged to avoid sourcing from or producing in protected or biodiversity priority areas. A handful of companies included language on protecting native ecosystems, providing funding or other support to conservation organizations, protecting ecosystem services, protecting intact landscapes, achieving net gain or no net loss of biodiversity, and reducing forest fragmentation.

The growing awareness of the seriousness and urgency of the risks from biodiversity loss to companies’ operations and profits may be the reason for this increase.

Biodiversity underpins natural systems, which provide ecosystem services that human society relies on. These services are often taken for granted, but are enormously valuable. They are worth roughly $130 trillion annually, which is more than 1.5 times the annual global GDP. Accordingly, the World Economic Forum has consistently ranked biodiversity loss among the top three biggest threats facing humanity in the next ten years, in terms of likelihood and severity of impact. Because they source agricultural and forestry products, the companies tracked by Supply Change are especially vulnerable to business impacts from biodiversity loss.

Lower yields in agricultural and forestry industries from degraded ecosystem services cause supply shortages, price fluctuations, and increased costs, both for companies directly producing agricultural and forestry commodities and companies that source these commodities to create products for end consumers. Companies may also have to contend with increasing costs from damaged transportation and other infrastructure from worsening natural disasters.

Consumer-facing (downstream) companies are especially vulnerable to reputational damage, often in the form of negative publicity from media and advocacy groups. Biodiversity loss is a powerful invoker of strong public sentiment; negative impacts to the cute and fuzzy faces of iconic species, like tigers or orangutans, tug on our collective heartstrings and can influence consumer and corporate customer buying practices. The human impact of companies’ activities on biodiversity may also undermine their efforts to protect human rights and wellbeing and invoke negative public sentiment; biodiversity loss is also detrimental for indigenous peoples and local communities, an issue that has received growing attention in recent years.

The growing threat of regulatory risk (e.g., increased costs of complying with government regulations related to biodiversity protection) and jeopardized access to investment capital may also be a motivating factor for companies to act on biodiversity. This enables them to identify and implement the most cost-effective strategy on their own timeline, before they are legally required to. The global agreement finalized at COP15 last month, for example, includes targets for companies to assess, monitor, and disclose the impacts of their operations and supply chains on biodiversity. Pressure to act may also come from other private sector actors, such as corporate customers and financial institutions with stricter biodiversity-related procurement or investment standards. For example, last month, a group of eleven investors launched a campaign called Nature Action 100, which will engage the 100 companies with the highest impact on nature to help them minimize their impacts and address biodiversity loss.

As companies increasingly broadcast their biodiversity protection intentions, various organizations have released tools and guidance documents to help companies measure and mitigate their impact on biodiversity. For example, in 2020, the Natural Capital Impact Group (a collaboration between the University of Cambridge’s Institute for Sustainability Leadership and several major corporations, including Kering, Mars, and Asda) released the Biodiversity Impact Metric guidance document, which provides guidance for companies on measuring biodiversity impacts and setting appropriate targets to reduce these impacts.

More guidance on measuring and managing biodiversity impacts is forthcoming. The Science-Based Targets Network (SBTN), which has been a major force in supporting the establishment of targets to reduce greenhouse gas emissions in companies’ operations and supply chains, is currently developing guidance for companies to set appropriate targets to reduce, eliminate, and even reverse biodiversity loss in their operations and supply chains. The SBTN’s guidance for measuring biodiversity impacts will likely be based on a combination of existing methodologies, such as the Species Threat Abatement and Restoration (STAR) metric and the land occupancy methodologies, designed to calculate baseline measurements and establish appropriate improvement targets that adhere to the mitigation hierarchy principles (i.e., avoiding and minimizing impacts on biodiversity are preferrable to restoring and offsetting biodiversity loss). Indicators will cover the connectivity and integrity of ecosystems, the percentage of species threatened with extinction, and the abundance of species.

But companies don’t have to wait for additional guidance on measuring and mitigating biodiversity impacts to make progress towards their biodiversity protection objectives. For many companies, especially those producing or sourcing forest-risk commodities, avoiding and minimizing habitat destruction in their operations and supply chains is guaranteed to be a major feature of any biodiversity protection strategy, and something that current and forthcoming guidance will undoubtedly flag as a high priority. Existing guidance, such as the Accountability Framework, which outlines best practices for establishing targets for deforestation and conversion-free supply chains, supply chain management, land management, and other deforestation-related policies and practices, can help companies get started on reducing biodiversity loss in their operations and supply chains.

Given the growing number and urgency of internal and external factors pushing companies to act to reduce their impacts on biodiversity, Supply Change expects that its ongoing and future research will continue to reveal even more companies taking steps to protect biodiversity, integrate biodiversity-specific targets with existing deforestation-focused strategies, and report additional implementation and impact information on their efforts to address biodiversity loss in their operations and supply chains.

For more information on our latest reporting, please see supplychange.org.

[1] Supply Change tracks corporate commitments that target reducing/eliminating deforestation from the production and sourcing of five commodities: cattle, cocoa, palm oil, soy, and timber and pulp.

Please note this article was originally published by the World Resources Institute: https://www.wri.org/insights/assessing-progress-ndcs

As countries prepare to gather at COP27 in Sharm el-Sheik, Egypt to advance the Paris Agreement on climate change, attention turns once again to its building blocks: countries’ 2030 climate commitments, known as nationally determined contributions (NDCs).

While the Paris Agreement established three global goals — limit global temperature rise to well below 2 degrees C (3.6 degrees F) and ideally 1.5 degrees C (2.7 degrees F), promote adaptation and resilience, and align financial flows with low-emissions, climate-resilient development — NDCs are the foundation. In its NDC, each of the Paris Agreement’s 194 Parties must lay out its aims to reduce emissions. Many also include plans for adapting to climate impacts and the financial requirements needed for implementation.

Countries must strengthen their NDCs on a regular, five-year cycle. Most submitted their initial commitments in 2015 and updated them by 2021. A new, stronger round of NDCs is due in 2025.

WRI’s Climate Watch platform tracks more than 200 indicators on all NDCs. The new State of NDCs report analyzed this data to draw out key trends and evaluate where the NDCs now stand. The key takeaway? Countries are making incremental progress on strengthening their NDCs, but what we really need to achieve the goals of the Paris Agreement is urgent transformational change.

Here’s what we know and what countries should keep in mind as they formulate new NDCs by 2025:

1) Despite some progress, countries must reduce emissions at least 6 times as much as current pledges.

The Intergovernmental Panel on Climate Change (IPCC) finds that global emissions must fall by at least 43% from 2019 levels by 2030 to align with the 1.5-degree C goal. By contrast, the current NDCs will only reduce global emissions by about 7% from 2019 levels. While this represents a 5.5 GtCO2e reduction compared to the initial NDCs — nearly equivalent to eliminating the annual emissions of the United States—countries will need to reduce emissions by 6 times as much to align with 1.5-degree C pathways.

While more countries have now set GHG reduction targets than in the initial NDCs and countries have expanded their targets to cover more sectors and types of greenhouse gases, the emissions impact of these improvements has been modest.  More than 85% of the improvement has come from large countries ratcheting up the stringency of their targets as opposed to adding new targets or expanding targets to cover new sectors and gases. Finding ways to accelerate ambition is paramount to the success of the Paris Agreement.

2) Countries are strengthening adaptation plans, but progress must speed up and expand.

In the current round of NDCs, countries nearly doubled the number of priority adaptation actions compared to their initial NDCs. These actions show improved coverage of sectors and systems for adaptation, with a strong focus on food and nutrition security, water and nature-based solutions. Current adaptation plans also include a stronger emphasis on equity than previous NDCs, with greater consideration of gender concerns and inclusion of Indigenous Peoples.

Yet more work needs to be done to implement adaptation at the speed and scale the climate crisis demands. Few countries’ NDCs include timeframes or indicators for implementation of adaptation plans, and less than half of current NDCs include adaptation monitoring, evaluation and learning, elements critical for ensuring that planned interventions translate into on-the-ground action.

3) Current levels of climate finance are insufficient for implementing even a subset of NDCs. 

While countries are not required to report their climate finance requirements in NDCs, 53% (89 countries representing 50% of the global population), all of which are developing countries, included an estimate for how much money they’ll need to implement their plans. These countries say they’ll need $4.3 trillion: $ 2.7 trillion for mitigation; $1.1 trillion for adaptation; and $475 billion unspecified.

Importantly, 51 countries’ stated needs amount to a total of $1.5 trillion to achieve their “conditional” NDC pledges, those contingent on receiving international finance to implement mitigation and adaptation plans. This figure dwarfs the promise by developed countries to provide $100 billion annually to developing countries by 2020 to support their climate actions — a target they’ve yet to meet. A new collective finance goal to go into effect after 2025 is currently under negotiation. Finance estimates from the 89 countries providing them underscore the need to mobilize significantly greater resources to implement NDCs.

4) Around 50% of developing countries include loss and damage in their NDCs.

Roughly the same number of countries refer to current or future costs of loss and damage — the consequences of climate change that go beyond what countries can adapt to — in their current NDCs compared to the first round. However, more countries are including information on loss and damage topics, such as slow-onset events, climate-induced migration, and provision of finance and capacity-building for loss and damage. This suggests that countries may prioritize elements of loss and damage even if they do not include cost figures in their NDC.

Additionally, Small Island Developing States (SIDS) are increasingly including loss and damage costs and related topics in their NDCs, suggesting that the most climate-vulnerable countries are prioritizing this information. Additional support for countries to analyze trends in loss and damage — including use of climate scenarios — and approaches for addressing it such as comprehensive risk management could improve this information in future rounds of NDCs.

5) 81% of NDCs seek to increase renewable energy, but few explicitly aim to reduce fossil fuel consumption.

In addition to economy-wide targets to reduce greenhouse gas emissions, most NDCs contain sector-specific measures. Those promoting renewable energy are among the most popular – 136 NDCs contain measures to boost renewable power, and more than half of these contain quantified renewable energy targets.

But limiting warming to 1.5 degrees C also requires slashing fossil fuel consumption dramatically, and far fewer NDCs explicitly address this. Only 51 contain measures pertaining to fossil fuel consumption, and a mere eight contain measures to phase out or phase down fossil fuel consumption.

6) Most NDCs include measures addressing forests and land use, but quality varies.

More than 140 NDCs contain measures to protect standing ecosystems, manage working lands to reduce emissions and/or restore degraded ecosystems. Seventy-eight NDCs contain measures in all three categories.

The quality of these measures, however, varies widely. Only just over half of NDCs have quantifiable targets related to land use and forestry, and very few incorporate critical measures such as financial needs and the rights of Indigenous Peoples and local communities.

7) NDCs prioritize electric mobility but don’t include other critical measures to reduce transport emissions.

A holistic approach to reducing emissions from transport includes avoiding unnecessary vehicle travel, shifting to efficient travel modes, and improving vehicle and fuel efficiency. The current NDCs have embraced vehicle improvements by promoting electric transport. Such measures more than doubled from the initial to the current NDCs.

The enthusiasm for electric mobility, however, was not matched by growth in other critical transport-related measures. Less than half of NDCs contain public transport measures. And active transport and low-carbon freight, shipping and aviation appear in only a handful of NDCs.

The next round of NDCs should ensure balanced attention to measures that avoid unnecessary travel, shift to sustainable travel modes, and improve vehicles, taking into account both passenger and freight sources.

(Learn more about transport in NDCs in WRI’s research paper, Sustainable Urban Mobility in the NDCs: The Essential Role of Public Transport.)

8) Only 15 of the 119 Global Methane Pledge signatories include a specific, quantified methane-reduction target in their NDCs.

Countries committed to the Global Methane Pledge, launched at COP26 in Glasgow in 2021, agreed to collectively reduce global methane emissions by 30% from 2020 levels by 2030. While around 80% of signatories include methane under the umbrella of their economy-wide GHG reduction targets, far fewer (only 15) include quantified methane-specific targets in their NDCs. This makes it challenging to determine how the collective Global Methane Pledge target will be met.

The next round of NDCs offers an opportunity for Global Methane Pledge signatories to spell out how they will contribute to the collective 30% reduction in methane emissions by 2030.

9) NDCs increasingly recognize the importance of a just transition.

As support for just transitions rise up the agenda for the UNFCCC, so too has its recognition in countries’ NDCs. The idea of a “just transition” is to reduce the negative impacts on workers, communities and value chains of transitioning to a zero-carbon economy while also ensuring that the benefits are fairly distributed.  Explicit attention to the idea in the initial NDCs was almost non-existent, only appearing in South Africa’s plan. In the current NDCs, 32 mention a just transition, although at varying depth. Some briefly mention the concept — such as Mauritius and Iceland — while other parties —such as South Africa, Antigua and Barbuda — have more fully incorporated the concept, with paragraphs or dedicated sections on just transition. The next round of NDCs, in addition to national policies, can spell out these efforts more fully.

What’s Next for Countries’ Nationally Determined Contributions (NDCs)?

As agreed at COP26 in Glasgow, countries are expected to continue strengthening their NDCs this year. But in the lead-up to COP27, progress appears to have reached a plateau.

As countries develop new plans in advance of 2025, it will be important to deliver not just incrementally more ambition, but an entirely different scale of ambition and a clear sense of the transformations countries will pursue.

September 12, 2022 – Supply Change (SC), a non-profit initiative of Forest Trends, has published a two-part series explores corporate progress on their sustainability commitments and supply chain management since 2020. The latest publication, Corporate Implementation, Impacts, and Reporting on No-Deforestation & “Nature Positive” Post 2020, offers a comprehensive evaluation of 125 leading consumer brands and retailers’ efforts to end commodity driven deforestation in the production or supply of forest-risk commodities including cattle, cocoa, palm oil, soy, timber, paper and pulp. 

About Supply Change: Forest Trends’ Supply Change Initiative draws from publicly available data to track a global set of companies, representing all levels of the supply chain from producers to retailers, and their commitments to address commodity-driven deforestation. SC compiles all research in a sophisticated database management system of over 900 companies that enables the generation of insights within cattle, cocoa, palm oil, soy, timber, paper and pulp supply chains. 

Over the next five years (2022–2027), SC will publish corporate and investor-tailored reports annually, summarizing key trends in the commitments, implementation and impacts of companies’ sustainable commodity commitments. They will identify trends in corporate sustainability commitments within key forest-risk supply chains that are emerging post-2020 and in addition to providing this “state of corporate deforestation commitments”, they will offer actionable information to enhance sustainable practices in corporate portfolios and mitigate potential reputational, operational, and market risks. 

Part one focused on corporate commitments and policies. In Part 1, Corporate Progress on No Deforestation and “Nature Positive” Post 2020, SC found that most companies had time-bound commitments to reduce forest loss, but many did not have sufficient systems to implement their commitments, including comprehensive risk assessment processes and greenhouse gas (GHG) emissions measurement and mitigation strategies that included Scope 3 emissions.  

Despite maintaining a commitment for at least one forest-risk commodity, many commitments did not cover companies’ entire supply chains, and SC noted recurring issues with commodity coverage and the level of detail provided by companies. Overall, SC found that companies are working to understand and minimize the impacts of their commodity production and sourcing, but many are still falling short on key facets of sustainability reporting. 

Part two focuses on implementation, impacts and progress towards achieving commitments. In the second part of this two-part series, Corporate Implementation, Impacts, and Reporting on No-Deforestation & “Nature Positive” Post 2020,  SC builds on its previous findings to assess trends in the approaches used by companies to implement and disclose progress on their commitments. Trends discussed include companies’ approaches to monitoring, traceability, risk management, supplier engagement, progress reporting, and GHG emissions reporting. This report also highlights the implications of these trends and where there are opportunities for investors to encourage companies in their portfolios to adopt best practices for effective implementation and reporting.   

Above all, this reporting demonstrates that urgent action is needed to overcome persistent barriers to drive progress in fulfilling corporate sustainability commitments in forest-risk supply chains. Both companies and investors will have a pivotal role in the next five years in driving transformational change towards eliminating commodity-driven deforestation, reducing greenhouse gas emissions, and protecting human rights throughout their supply chains. 

For more information, please contact [email protected] 

10 August 2022 | Blue carbon and its many benefits are popular topics in discussions about how to address climate change. Many types of blue carbon projects hold tremendous potential for sequestering carbon and protecting their ecosystems, but they are not yet established, which has opened some debate about how impactful blue carbon can be in sequestering greenhouse gases at the scale we need.

There is, however, one type of blue carbon offset project that can be accurately, reliably and transparently measured in terms of emissions reductions. And it is critical for supporting local ecosystems and communities. It’s mangrove forests. This summer the Climate Action Reserve registered the first-ever mangrove forest project in Mexico, marking a significant milestone in demonstrating the impact and feasibility of this type of project.

To understand what this offset project type is and the value it brings, let’s look at the basics.

Mangrove forests are unique and distinct. They are found around tropical and subtropical shorelines and thrive in those salty waters, where other trees cannot survive. Their thick prop roots are twisted and complex, making them appear to stand above the water. Their roots also slow down water flow and allow sediment to collect. Because of these characteristics, mangrove forests are natural protectors and providers. They stabilize coastlines, reduce erosion and provide critical habitat for organisms.

Mangrove forests are critical to addressing climate change because they are excellent at storing carbon. In fact, mangrove forests are among the most carbon-dense ecosystems and can sequester four times more carbon than rainforests. Much of the carbon is stored in the soil collected beneath the mangrove trees.

Additionally, mangrove forests are critical for protecting against the current impacts of climate change by stabilizing coastlines and reducing erosion from storms, currents and tides.

Unfortunately, numerous issues are facing the world’s critical mangrove forests. The American Museum of Natural History (AMNH) describes mangroves as “among the most threatened habitats in the world.” Less than 50 percent of the world’s mangrove forests were intact at the end of the 20^th century, and of those that remain, half are in poor condition.

Forces threatening mangrove forests include:

• The conversion of wetland areas to artificial ponds by the aquaculture industry. Water is diverted away from the mangrove forests and waters are contaminated by chemicals, antibiotics and organic waste.
• The conversion and destruction of mangrove forests for agricultural use.
• The displacement of and damage to mangrove forests for coastal development of ports, docks, buildings, golf courses and marinas.
• The logging of mangrove forests by charcoal and lumber industries.
• Extreme weather, warmer air and water temperatures, increasing variability and intensity of rainfall, ocean salinity and other impacts caused by climate change.
• Irresponsible tourism.

The Climate Action Reserve is working to protect and restore these unique ecosystems. The organization recently registered the first-ever mangrove forest offset project in Mexico. The Manglares San Crisanto/San Crisanto Mangroves project, which was registered under the Reserve’s Mexico Forest Protocol v1.5, is the first of its kind in Mexico. It includes three reporting periods, and an estimated 47,908 tonnes CO2 have been removed by the project.

The Reserve’s Mexico Forest Protocol encourages the protection, improved management and restoration of mangrove forests through the issuance of offset credits for additional emissions sequestration activities above the baseline. Communities following the protocol receive economic incentives and resources to ensure that these coastal ecosystems provide greater benefits for surrounding communities and biodiversity, build greater resilience to the impacts of climate change and store more carbon to benefit the global climate.

As the first project of its kind in Mexico and also the first mangrove project registered with the Reserve, the San Crisanto Mangroves project is pioneering and demonstrates the ability of mangrove forests to become viable offset projects and support local communities.

For the San Crisanto community, the mangrove forest is central to the ejido (land managed communally) and the community members’ way of life, which is deeply connected to the mangroves through fishing, coconut plantation, salt production, protection of native animals and sustainable tourism. Prior to developing the project, the community had lost water flow to the mangrove forest, which resulted in the loss of fish, birds and biodiversity and the area was immensely deteriorated. While developing the project, the community recognized the importance of the mangrove forest to their existence. Their offset project provides them with continuity to their way of life.

According to Jose Ines Loria Palma, President of Fundación San Crisanto, the San Crisanto Mangroves project taught the community many lessons, including:

• You have to take a proactive attitude towards life, not wait
• You must have a very long-term sustainable development project
• It is very important to learn and teach to respect nature
• Capacity development is a very important success factor
• Carbon and biodiversity are not merchandise; what is paid for is the preservation of life

August 11, 2022.   This  article was originally published on americancarbonregistry.org

LITTLE ROCK, Ark., May 30, 2022 – The American Carbon Registry (ACR), a nonprofit enterprise of Winrock International, has announced updated program rules, effective immediately, that prohibit the tokenization of ACR carbon offset credits unless explicitly authorized by ACR. The updated rules, detailed in the legal Terms of Use agreement with ACR account holders, are designed to protect carbon asset integrity, including by ensuring that ACR-issued credits are not double sold or used by more than one entity to make environmental claims.

Concerns about blockchain’s role in the carbon markets has been amplified in the recent months amid the swift emergence of a crypto carbon market, in which millions of carbon credits have been retired, tokenized and converted to cryptocurrencies.

“Over the course of the last year, we have been in discussions with a number of companies interested in utilizing a range of technologies to streamline the credit creation process as well as to create digital carbon assets such as tokens and carbon-backed cryptocurrencies. While interested in the opportunities that these and other digital technologies offer to create efficiencies in carbon measurement, monitoring, reporting and verification, and to democratize access to markets, we are committed to a rigorous assessment process to ensure that they don’t undermine the foundations of carbon market integrity,” said Mary Grady, the Executive Director of ACR.

“As things stand at the moment, we believe the new link between carbon markets and unregulated cryptocurrencies presents a reputational vulnerability that could jeopardize confidence in carbon markets at precisely the time we need scale and transparency for markets to help achieve Paris Agreement climate targets,” Grady added.

ACR’s newly announced rules are the first step in the development of a set of program guardrails to protect market integrity. Alongside its own efforts to understand the risks and opportunities, as well as what rules would need to be in place for the creation of digital carbon assets, ACR has participated in the International Emissions Trading Association (IETA) Council Task Group on Integrity in Digital Climate Markets, launched earlier this year, which seeks to ensure sound foundations for the integration of carbon markets with digital technologies. The task group has already issued a set of principles to ensure integrity in digital carbon market offerings.

Over the coming months, ACR will build on the IETA principles and collaborate with carbon market participants with the aim of establishing a common implementation roadmap to safeguard the structural, legal and environmental underpinnings of carbon markets, while optimizing climate impact and access to finance. This will include program rules to authorize the tokenization of credits; developing the required registry infrastructure to ensure transparency and avoid double selling and double claims; and the implementation of appropriate legal and regulatory considerations along the carbon value chain.

10 August 2022 | With the passage of the Energy Conservation (Amendment) Bill, 2022, the domestic carbon market is becoming a reality. However, this also brings in many question marks. The statement from the Hon’ble minister regarding restrictions on the export of carbon credits will be the major focal point in the planned launch of India’s carbon market.

There are few of the areas we must need to look into i.e, first as the Energy Conservation (Amendment) Bill, 2022 intends to bring in the energy segment under the carbon market, it appears that the export ban of carbon credit may be immediately impacting the credits generated from the renewable energy sector; many of which are of low-hanging fruits. Projects under the renewable energy segment, including wind and solar, may cease generating any carbon credits post-2020. The authority may propose a new framework which will make many of the existing low-hanging RE projects ineligible under the domestic carbon market. If permitted, it will immensely impact the sustainability of credits from PAT and REC, considering the current ambition of integrating PAT and REC under a new carbon market framework. Today in India, the demand for carbon credit from the voluntary market segment is very limited, and any policy flexibility of allowing low-hanging carbon credits at par withPAT and REC under the existing market segment; will pull the price of REC and ESCerts (Energy Saving Certificates) down. Thus, the policy framework should need to distinguish the credits from the different segments and create a pathway to integrate all the credits with a timeline of 5 to 10 years. Unless the proposed future carbon market framework is not flexible in accommodating voluntary carbon market standards, many projects under the voluntary carbon market standard will cease to exist. Thus, a significant testing phase will happen during the next few months to test the market’s fair, credibility and sustainability.

The second is on credits generated from forestry, waste management and transport sectors. Although the proposed bill limits renewable energy and energy efficiency sectors , it is clear that other sectors may need to pass through the same test of export ban considering India’s updated NDC targets reduction of emissions intensity of GDP by 45 per cent by 2030, compared to 2005 levels. These issues will be assessed during the next few months under the corresponding adjustment. The testing phase is how these sectors will be accommodated in the new future and under what provision.

The third point is what will be defined as a carbon credit in the context of India. As per the bill, “carbon credit certificate” means the certificate issued by the Central Government or any agency authorised by it under section 14AA. With the emergence of many voluntary carbon market standards and players and overnight new players declaring a new standard/platform/registry, it will be a critical phase to redraw the eligibility criteria for defining carbon credit certificates. The carbon market has failed due to credibility issues despite its novel intention, and thus the foundation of India’s carbon market has to be based on credible carbon credits. With Article 6.4 becoming the front runner in kick-starting the carbon market under Paris Agreement in the near future, and many of the CDM components may be the choice during this transition, India’s carbon market framework will also closely follow the safest pathway in following the multilateral framework and guideline aligning with A6.4.

The final point is that the message on the export ban of carbon credits may not have been intended for sectors where large investment is needed through carbon financing. However, the generalisation of the export ban statement in its spirit may hamper India’s current stature as one of the preferred investment destinations for the realisation of quality carbon credits. With billions of Dollars of investment commitment to qualitative and impact carbon (where government incentives are hardly present), the government should try to bring much clarity to these sectors. Today there is immense demand for community-led and nature-based solutions where the private sector and communities with investment from impact funds aim to reduce tremendous greenhouse gas emissions. Many of these sectors, such as cookstove or soil carbon in the agriculture sector, are immensely thriving and changing the rural landscape and ecosystems. Although the current bill doesn’t have any provision to limit the existence of carbon credits, there is an immense threat if we should not bring in a very detailed and consistent policy framework during the course work of the drafting of the carbon market framework. And we should not generalise the carbon credits for each sector as one. We must note that there is not much demand in India for quality carbon credits considering small players who will offset their carbon emissions. Thus, we should facilitate a supportive policy framework in the sectors where government intervention and engagements are minimal, which will help large investment flow for mitigating GHG emissions from these sectors.

Ecosystem Marketplace has recently signed a three-year agreement with Forest Stewardship Council (FSCGD GmbH) to collaborate and develop shared insights regarding carbon markets and non-carbon benefits as they pertain to FSC certified forests.  For more than 25 years FSC has pioneered forest certification and promoted responsible management of the world’s forests. Through this collaboration FSC seeks to connect FSC-certified forest managers with new markets, help project managers market FSC benefits and enable carbon markets to drive value to FSC certified forests.  Ecosystem Marketplace has tracked global carbon market transactions and associated benefits “beyond carbon” for more than 16 years.  Transaction attributes that EM tracks include co-benefit standards such as Climate, Community and Biodiversity (CCB) and project assessments of Sustainable Development Goals.

The shared workplan includes publishing a brief discussion paper focusing on non-carbon benefits of forest carbon projects and the overlap with FSC certified forests.  Research will pull from carbon markets data that EM collects, FSC certified projects, public data sets such as international carbon standard registries, and structured interviews with forestry project managers. The work will begin by cross mapping FSC certified forests with carbon market data that EM has compiled for forestry projects, specifically Improved Forestry Management projects, in order to identify the subset of forestry projects on which the analysis will focus.

The first discussion paper will be published pre-COP27 in Egypt in November and accompanied by a webinar presentation.  EM and FSC also hope to collaborate on side events focused on land use and the voluntary carbon market at the Forestry Pavilion at COP27.

If interested, or to learn more  about this collaboration, contact [email protected] or [email protected]

This article first appeared on Biofilica

15 June 2022 | A new Federal decree puts Brazil on route to capture an important share of the voluntary carbon market that is expected to grow at least tenfold by 2030¹ and helps to understand the executive branch’s strategy of what may turn out to be a Brazilian ETS².

In a pompous event held at the Botanical Garden in Rio de Janeiro and attended by the President, his Ministers of Economy, Environment, Foreign Affairs, Mines and Energy, with the presidents of the Central Bank, Bank of Brazil, Petrobrás, as well as dozens of CEOs and entrepreneurs of companies linked to the energy sectors, agriculture and environmental markets, the Federal Government announced a series of measures to increase Brazilian competitiveness in businesses related to decarbonization and so-called Green Investments. Undoubtedly, the most important was Decree 11,075, which established procedures for sectoral agreements for greenhouse gas (GHG) mitigation, in addition to establishing the National System for Reducing Greenhouse Gas Emissions, entitled SINARE.

A 13-year long journey

The legal basis of the decree dates back to 2009, when the National Climate Change Policy (PNMC, in Portuguese) was established by law. It is in the PNMC that the idea of sectoral agreements for GHG mitigation originates, targeting, for example, the energy, agriculture and transport sectors; it also introduced the concept of the Brazilian Market for Emission Reduction, a green and yellow ETS.

Unfortunately, after 13 years of the PNMC, we have not yet established sectoral plans and it was only until recently that we begun to see significant advances in the business environment for the development of voluntary carbon markets in Brazil, with the establishment of the Forest + Carbon Program (2020), and the National Payment Policy for Environmental Services (law 14,119) of 2021.

This pro-market direction is essential for Brazil to capture a share consistent with our competitive advantages, bringing here, via carbon markets, a necessary financing for a decarbonization route, especially in activities related to land use such as within agriculture and forest management.

This decree is only the long-awaited kick-start, as there is still a long regulatory path to address complex technical issues and legal gaps that still need to be clarified, such as the legal nature of the carbon credits, and adopted, such as the Socio-Environmental Safeguards for registration in the SINARE. Some market analysts and lawyers linked to the topic suggest that some of these gaps should be filled in the form of law, currently debated in Congress under law proposal 528/21³. Such complementary initiatives should be followed in parallel with other pricing mechanisms established by law, a fact widely recognized in Article 6 the Paris Agreement.

In any case, it is evident that the political signal of the path chosen by Brazil in relation to the financing of activities related to decarbonization, is one of more markets and less taxes. This approach is also in line with the recently published World Bank carbon pricing report, which shows that worldwide in 2021, the collected total via a carbon market was around US$ 56 billion, while in tax regimes the amount stood at US$ 28 billion. Emphasizing that in the case of markets, this is only the value of primary transactions (purchase of allowances⁴ + first sale in the voluntary market), that is, it does not include the secondary market that is estimated to be in the magnitude of US$ 754 billion.

What does the voluntary market have to do with all this?

The voluntary carbon market serves to increase the climate ambition of various actors, such as companies committed to Net Zero paths, while financing activities that are not yet financially viable, such as forest restoration and conservation. Numerous market analyses and reports⁵ indicate a growth between 15 and 20 times in the next 10 years. McKinsey estimates a market value of around $50 billion by 2030. Last year alone, more than 110 GHG sequestration and reduction initiatives funded by this market were launched only in  Verra’s Verified Carbon Standard (VCS).

Seeking a slice of this global funding cake is the obligation of any government that is seriously committed to sustainable development in Brazil. In this sense, instituting SINARE, observed by the need to define Social and Environmental Safeguards, represents a major advance and deserves to be celebrated. This mechanism has been a longstanding demand by project developers, including Biofílica. The expectation is that this central and digital registry will serve as a kind of “filter”, allowing only the registration of high integrity, socio-environmentally sound programs and projects, with real climatic benefits. This only strengthens the quality of “Made in Brazil” credits and makes us even more competitive to receive financing via carbon markets. Export.

It is also possible to imagine that within a five-year horizon, credits registered within the SINARE can access demand from regulated companies in Brazil that will need to achieve their sectoral goals. Domestic sale.

Portuguese version see below:

Decreto do Governo Federal coloca o Brasil na rota de capturar uma importante fatia do mercado voluntário de carbono que deve crescer pelo menos dez vezes até 2030¹ e ajuda a entender a estratégia do executivo do que pode vir a ser um ETS² Brasileiro.

Em um evento pomposo realizado no Jardim Botânico do Rio de Janeiro e que contou com a presença do presidente da República, seus ministros da Economia, Meio Ambiente, Relações Exteriores, Minas e Energia, com os presidentes do Banco Central, do Banco do Brasil, da Petrobrás, além de dezenas de CEOs e Empreendedores de empresas ligadas aos setores de energia, agropecuária e mercados ambientais, o Governo Federal anunciou uma série de medidas para aumentar a competitividade brasileira em negócios ligados à Descarbonização e aos chamados Investimentos Verdes. Sem dúvida, o mais importante foi o decreto 11.075 que estabelece procedimentos para acordos setoriais de mitigação de Gases de Efeito Estufa (GEE), além de instituir o Sistema Nacional de Redução de Emissões de Gases de Efeito Estufa, intitulado de SINARE.

13 anos de trajetória

A base jurídica do decreto é de 2009, quando foi estabelecida por lei a Política Nacional de Mudança do Clima (PNMC). É na PNMC que surge a ideia dos acordos setoriais para mitigação de GEE, incluindo por exemplo os setores de energia, de agricultura e transporte; além de introduzir o conceito do Mercado Brasileiro de Redução de Emissões, o ETS verde e amarelo.

Infelizmente já passados 13 anos da PNMC ainda não temos estabelecido os planos setoriais e muito recentemente começamos a ver avanços expressivos nas condições de negócios (“business environment”) para o desenvolvimento dos mercados voluntários de carbono no país, com o estabelecimento do Programa Floresta+ Carbono (2020), e da Política Nacional de Pagamento por Serviços Ambientais (lei 14.119) de 2021.

Esse direcionamento pró mercado é essencial para que o Brasil possa capturar uma fatia condizente com nossas vantagens competitivas, trazendo para cá, via mercados de carbono, financiamento mais do que necessário para uma rota de descarbonização, principalmente em atividades ligadas ao uso da terra como agropecuária e florestas.

Esse decreto é apenas o tão esperado pontapé inicial, afinal resta ainda um longo caminho regulatório para endereçar questões técnicas complexas e lacunas jurídicas que ainda precisam ser esclarecidas, como da própria natureza jurídica dos créditos, e adotadas, como por exemplo as Salvaguardas Socioambientais para registro no SINARE. Alguns analistas de mercado e advogados ligados ao tema sugerem que parte dessas lacunas deveriam ser preenchidas em formato de Lei, hoje debatidas no Congresso sob o PL 528/21³.Iniciativas complementares que devem seguir em paralelo a outros mecanismos de precificação estabelecidos por Lei, fato amplamente reconhecido no artigo 6 do Acordo de Paris.

De qualquer maneira fica evidente a sinalização política do caminho escolhido pelo país em relação ao financiamento de atividades ligadas à descarbonização, mais mercados e menos impostos. Muito em linha com o recém-publicado relatório do Banco Mundial sobre Precificação de Carbono, que mostra que mundialmente em 2021 o total arrecadado via mercado de carbono foi da ordem de US$ 56 bi, enquanto nos regimes de impostos (tax) o valor ficou em US$ 28 bi. Enfatizando que no caso dos mercados, esse é apenas o valor das transações primárias (compra de allowances⁴+ primeira venda no Voluntário), ou seja, não inclui o mercado secundário que pode ser na ordem de US$ 754 bi.

E o mercado voluntário com isso?

O mercado voluntário de carbono serve para aumentar a ambição climática de diversos atores, como empresas comprometidas com o Net Zero, e ao mesmo tempo financiar atividades ainda sem viabilidade financeira, como restauração e conservação florestal. Inúmeras análises e reportes de mercado⁵ indicam um crescimento entre 15 à 20 vezes nos próximos 10 anos. A Mckinsey estima um valor de mercado da ordem de US$ 50 bi em 2030. Só no ano passado, foram lançadas mais de 110 iniciativas de sequestro e redução de GEE financiadas por esse mercado somente no padrão Verified Carbon Standard (VCS) do Verra.

Buscar uma fatia desse bolo global de financiamento é obrigação de qualquer governo comprometido seriamente com o desenvolvimento sustentável no Brasil. Nesse sentido, a instituição do SINARE, observada à necessidade da definição de Salvaguardas Socioambientais, é um grande avanço, pleito antigo das empresas desenvolvedoras de projetos como a Biofílica, e merece ser celebrado. A expectativa é que essa central única e digital sirva como uma espécie de “filtro”, permitindo somente o registro de programas e projetos socioambientalmente íntegros, com benefícios climáticos reais. Isso só fortalece os créditos “Made in Brazil” e nos deixa ainda mais competitivos para receber financiamento via mercados de carbono. Exportação.

É também possível imaginar que em um horizonte de cinco anos os créditos registrados dentro do Sinare possam acessar demanda de empresas reguladas no Brasil que precisarão atingir suas metas setoriais. Venda doméstica.